INSURANCE companies have a terrific opportunity to increase profits and improve agency relationships by designing great contingency contracts. Such contracts are fair and create incentives for agencies to produce results beneficial to the carrier, agencies and consumers. In my experience, companies with the fairest contracts also achieve the best operational results. This correlation should give all insurers a powerful incentive to examine their contingency contracts.
While insurance companies and agencies are in daily contact, their worlds are often far apart. The best contracts bridge this chasm. Therefore, the first step in creating a good contingency contract is to understand how it looks from an agent's point of view. Often, however, insurers fail to do so. Let's consider five aspects of contingency contracts in which carriers often come up short.
Stop losses: Giving finance people the sole power to create contingency contracts is like letting computer geeks design a car without input from the sales force. No doubt the car would boast a lot of cool gadgets, but it probably would be way off target in regard to what consumers value and would pay for.
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